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A Test of the Cost of Carry Relationship using 90-Day Bank Accepted Bills and the All Ordinaries Share Price Index
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Richard Heaney
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Abstract
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Cross contract regression analysis provides a framework for testing the statistical fit of the cost of carry model in the financial futures contracts, the 90-Day Bank Accepted Bill Futures contract and the Australian All Ordinaries Share Price Index Futures contract. The interest rate to maturity is a major factor in pricing the ninety day bank accepted bill futures contract consistent with simple cost of carry model yet the cost of carry model provides little explanatory power for the share price index futures contract.
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Keywords
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FUTURES; ARBITRAGE; PRICING MODELS.
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Contact Details
Richard Heaney
Department of Commerce
Faculty of Commerce and Economics
University of Queensland
St Lucia QLD 4072
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This paper has benefited from the helpful comments of: Prof. F. Finn and Dr. R. Myers, both from the University of Queensland; Martin Lally from Victoria University, a discussant at the 1992 AAANZ Conference; the participants at an ANU Commerce Department Workshop; Dr. A Hall, Bond University; Dr. Garry Twite, AGSM; and two anonymous referees. The usual disclaimer applies.
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